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Star Health IPO: A SWOT (strengths, weaknesses, threats and opportunities) analysis

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Star Health IPO: A SWOT (strengths, weaknesses, threats and opportunities) analysis


Rakesh Jhunjhunwala-backed Star Health, the biggest private insurance player in the country, has reported losses for the past 18 months. And now the COVID-19 variant Omicron poses a potential threat to the IPO.

Star Health IPO: A SWOT (strengths, weaknesses, threats and opportunities) analysis
Big bull Rakesh Jhunjhunwala-backed Star Health and Allied Insurance Company's initial public offer (IPO) opened for bidding on November 30. The Star Health IPO includes fresh issuance of Rs 2,000 crore and an offer for sale (OFS) of shares worth Rs 5,249 crore by promoters and existing shareholders.
By 4:06 pm on Tuesday, the first day of the bidding process, the Star Health IPO was subscribed six percent, receiving bids for 47.8 lakh shares as against the 8.1 crore shares on offer.
The IPO will close on December 2. The company plans to raise up to Rs 7,249.18 crore through the share sale in the price band of Rs 870-900.
The company is the largest private health insurance player as well as the largest retail health insurance company in India by health GWP (gross written premium). Star Health has a 15.8 percent health insurance market share and a 31.3 percent retail health insurance market share in F21, according to CRISIL Research.
  • The company is the biggest private insurance player in the country and is the foremost player in the important retail health insurance space
  • Star Health’s network has a well-spread distribution network that allows it to tap into the growing retail health insurance market pan-India.
  • The company offers a strong and diverse portfolio of products, which extends its lead against its peers
  • Opportunities 
    • Star Health is perfectly poised to take advantage of the growing insurance market in India. Health insurance penetration in India stood at 0.36 percent of GDP in 2019, against the global average of 2 percent of GDP globally. The COVID-19 pandemic has Indians more willing to invest in health insurance, leading to better opportunities for growth.
    • The company continues to adapt quickly to the post-COVID-19 pandemic environment while also focusing on SME sales for retail health insurance.
    •  Weakness 
      • The company has reported losses for the past 18 months, with a loss of Rs 825.58 crore in FY21 and of Rs 380.27 crore in FY22 until September 31.
      • Based on negative earnings and past losses, the issue price appears to be aggressively valued and may cause a repeat of the One97 IPO debacle
      • Threats 
        • The renewed risk from COVID-19 variant Omicron may be a potential threat as increased claims eat into income for one more financial cycle
        • Unfavourable government policies and regulations may further hamper efforts to improve profitability amidst a post-pandemic environment
        • With only 10 percent of the issue being reserved for retail investors, it is highly likely that most investors will not be allotted a lot in the IPO. Axis Capital has recommended investors to subscribe to the issue, with Angel One recommending the same.
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